The Local Government Pension Scheme...stakeholder pension scheme from your earnings as a councillor. There are HM Revenue and Customs controls There are HM Revenue and Customs controls

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LGPEN 68

The Local Government Pension Scheme

A Guide to the Local Government Pension Scheme for Eligible Councillors in England and Wales

[English and Welsh version – June 2014]

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The Index Page

Introduction 5

The Choice

Your Pensions Choice 6

State Second Pension Scheme (S2P) 6

Personal Pension Plans and Stakeholder Pension Schemes 6

Local Government Pension Scheme 6

The Guide

Joining the Local Government Pension Scheme (LGPS) 8

Who can join? 8

How do I ensure that I have become a member of the LGPS? 8

Can I join the LGPS if I already have a personal pension or

stakeholder pension scheme? 8

I'm already receiving an LGPS pension – will it be affected

if I join again? 9

Contributions 9

What do I pay? 9

What does the council pay? 9

Do I receive tax relief on my contributions? 9

What about my National Insurance contributions? 9

Can I make extra contributions to increase my benefits? 9

Is there a limit to how much I can contribute? 10

Can I transfer pension rights into the LGPS from a previous

pension scheme? 10

Points to Note 10

Retirement Benefits 11

When can I retire? 11

What are my retirement benefits? 12

How much will my pension be? 12

How much will my lump sum be? 12

Example pension and lump sum calculation 12

Can I give up some of my pension to increase my lump sum? 13

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How will my pension be paid? 13

Will my pension increase? 13

General Points to Note on retirement benefits 13

Ill Health Retirement 15

What happens if I have to retire early due to ill health? 15

How is an ill health pension and lump sum calculated? 15

What if I do not qualify for an ill health pension and lump sum? 15

Points to Note on ill health retirement 15

Early Retirement 17

Can I retire early? 17

Will my pension and lump sum be reduced if I retire early? 17

Points to Note on early retirement 18

Late Retirement 19

What if I carry on working after age 65? 19

Protection for your Family 20

What benefits will be paid if I die in service? 20

What benefits will be paid if I die after retiring on pension? 21

Points to Note 22

Increasing your Benefits 24

How can I increase my benefits? 24

Points to Note 26

Ceasing to be a Councillor before Retirement 27

What happens to my benefits if I cease to be a councillor

participating in the LGPS? 27

What will happen to my benefits if I choose to defer them? 28

What will happen if I die before receiving payment of my

deferred benefits? 28

What will happen if I wish to transfer my accrued pension benefits

to another (non LGPS) scheme? 29

Points to Note 29

Opting-out of the LGPS 31

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Can I opt-out of the LGPS? 31

Can I re-join the LGPS at a later date? 31

Points to Note 31

Some other LGPS Provisions 32

Pensions and Divorce or Dissolution of a Civil Partnership 33

Points to Note 34

Scheme Administration 35

Who runs the LGPS? 35

How is the Scheme amended? 35

Are the Scheme benefits protected? 35

What other legislation applies to the Scheme? 35

How can I check the accuracy of my pension records? 35

What other information am I entitled to? 35

Help with Pension Problems 36

Who can help me if I have a query or complaint? 36

How can I trace my pension rights? 37

Pension Terms Defined 38

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Introduction

The information in this booklet is based on the Local Government Pension Scheme Regulations 1997 and other

relevant legislation. The booklet is for councillors in England or Wales and reflects the provisions of the LGPS

and overriding legislation at the time of publication in June 2014. The Government may make changes to

overriding legislation and, after consultation with interested parties, may make changes in the future to the

LGPS.

Please note that the LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014 amended access

to the LGPS for councillors in England. From 1 April 2014 councillors in England are unable to join the LGPS.

Those councilor members in England who were in the scheme on the 31 March 2014 can remain in the scheme

until the end of their current term of office. Councillors in England will not be able to rejoin the LGPS in any

subsequent term of office in which they serve. Councillors in Wales continue to have access to the LGPS from

1 April 2014. Councillors in England should take note of the update provided in June 2014 and available on the

LGA's website.

The booklet is for general use and cannot cover every personal circumstance. In the event of any dispute over

your pension benefits, the appropriate legislation will prevail as this booklet does not confer any contractual or

statutory rights and is provided for information purposes only. The booklet explains the benefits available to

you when you join the Local Government Pension Scheme. It describes how the Scheme works, what it costs to

join and the financial protection that it offers to you and your family.

Where pension terms are used, they appear in bold type. These terms are defined on pages 38 to 48 at the

back of this booklet.

The national web site for members of the LGPS can be found at www.lgps.org.uk

The LGA website referred to in this guide can be found at

http://www.local.gov.uk/web/lgaworkforcepensions/eligible-councillors-in-england-and-wales

Contacting the Pensions Office

Telephone helpline: 0115 977 4646

Email: [email protected]

Website: www.nottspf.org.uk

Address: Notts LG Pensions Office

Business Support Centre

Nottinghamshire County Council

c/o County Hall

West Bridgford

Nottingham NG2 7QP

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The Choice

Your Pensions Choice

Your retirement is a goal to look forward to. However, if your retirement is to meet your expectations, you will

need to plan and secure your retirement income.

Your retirement income and benefits, over and above the basic flat-rate State pension, will in general be

provided by the State Second Pension Scheme (S2P), a personal pension plan, a stakeholder pension scheme

or by an occupational pension scheme such as the Local Government Pension Scheme. These are described

briefly below.

State Second Pension (S2P)

The State Second Pension (S2P) is part of the State Pension payable in addition to the flat rate Old Age

Pension. Benefits are paid by the Department for Work and Pensions (the old DSS) and cannot be paid before

State pension age. Initially, S2P was an earnings related pension but from April 2009 it began building up as a

flat rate pension.

Personal Pension Plans and Stakeholder Pension Schemes

Various institutions, such as banks, building societies and life assurance companies provide and administer

personal pensions and stakeholder pension schemes. Your chosen organisation would invest your

contributions and when you retire the investments are cashed in and the sum of money realised is used to buy

retirement benefits from the insurance market. Your benefits are therefore based on investment returns and

are not guaranteed or linked to your earnings. The age from which you may receive them will vary according to

the plan.

Local Government Pension Scheme

The Local Government Pension Scheme (LGPS) is a statutory, funded pension scheme. As such it is very secure

because its benefits are defined and set out in law. The LGPS is contracted-out of the State Second Pension

(S2P) and must, in general, provide benefits at least as good as most members would have received had they

been members of S2P.

Highlights of the LGPS are:

• a tax-free lump sum when you retire

• a pension based on your career average pay

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• the ability to increase your pension by paying additional voluntary contributions

• voluntary retirement from age 60

• retirement from age 50 with your authority’s consent

• an ill health pension from any age

• a death in service lump sum of two times career average pay

• a spouse's or civil partner’s pension

• children's pensions

• the index-linking of benefits to ensure that they keep pace with inflation.

In addition, as a member of the LGPS, your contributions will attract tax relief at the time they are deducted

from your allowances and, up to State pension age, you will also pay lower National Insurance contributions

on earnings between the Lower Earnings Limit and Upper Accruals Point unless you have opted to pay the

married woman’s/widow’s reduced rate of National Insurance. Be aware that from April 2016 the Government

plans to remove the reduction in National Insurance contributions for all contracted out pension schemes, but

full details on how this will work have yet to be finalised.

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The Guide

Joining the Local Government Pension Scheme (LGPS)

Please note that the position for councillors in England changed from 1 April 2014.

Councillors in England should take note of the update provided in June 2014 and available

on the LGA's website.

Who can join?

The LGPS is available to all councillors of a Welsh county council or county borough council who are offered

membership of the Scheme under the council’s scheme of allowances and who are under age 75. From 1 April

2014 the LGPS is not available to councillors and elected mayors of an English county council, district council or

a London borough council, except if they were a member of the scheme on 31 March 2014. In such cases they

can remain a member of the scheme until the end of their current term of office (or age 75 if earlier). Those

who are offered membership are termed eligible councillors. If you have been offered membership of the

Scheme it will be for you to decide whether or not to opt to join the Scheme. If you make an election to do so

you will become a member of the LGPS from the beginning of the first pay period following the receipt of your

option (but see the special rules for previous optants out on page 31).

How do I ensure that I have become a member of the LGPS?

To secure your entitlement to the Scheme benefits it is important that you complete and return the joining

form if you wish to opt into membership of the Scheme. On receipt of your form, relevant records will be set

up and an official notification of your membership of the Scheme will be sent to you. In addition, you should

check your allowance payments to ensure that pension contributions are being deducted.

Can I join the LGPS if I already have a personal pension or stakeholder pension scheme?

If you currently contribute to a personal pension plan or stakeholder pension scheme and decide to join the

LGPS, you can, if you wish, still continue to make your own contributions to the personal pension or

stakeholder pension scheme from your earnings as a councillor. There are HM Revenue and Customs controls

on the total amount of contributions you can make into all pension arrangements and receive tax relief. You

can, if you wish, pay up to 100% of your UK taxable earnings in any one tax year into any number of concurrent

pension arrangements of your choice (or, if greater, £3,600 to a “tax relief at source” arrangement, such as a

personal pension or stakeholder pension scheme) and be eligible for tax relief on those contributions. There

are also controls, known as the lifetime allowance and the annual allowance, on all the pension savings you

can have before you become subject to a tax charge. Most scheme members’ pension savings will be less than

these allowances.

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I'm already receiving an LGPS pension – will it be affected if I join again?

If you become a councillor where your council offers you membership of the LGPS you must tell the LGPS fund

that pays your pension about your new position, regardless of whether you join the scheme in your new

position or not. They will then check to see whether the pension they are paying should be reduced.

Contributions

What do I pay?

Your contribution is currently 6% of the pay you receive.

Your contributions are very secure. As the LGPS is set up by Statute, payment of benefits to its members is

guaranteed by law.

What does the council pay?

The council pays the balance of the cost of providing your benefits after taking into account investment

returns. Every three years, an independent actuary calculates how much the council should contribute to the

Scheme. The amount will vary, but the present underlying assumption is that you contribute approximately

one third of the Scheme's costs and the council contributes the remainder.

Do I receive tax relief on my contributions?

The Scheme is fully approved by HM Revenue and Customs, which means that you receive tax relief on your

contributions. To achieve this, your contributions are deducted from your allowances before you pay tax. So,

for example, if you pay tax at the rate of 20%, every £1 that you contribute to the Scheme only costs you 80p

net. There are restrictions on the amount of tax relief available on pension contributions. If the value of your

pension savings increase in any one year by more than the annual allowance you may have to pay a tax

charge. Most people will not be affected by the annual allowance.

What about my National Insurance contributions?

As the Scheme is contracted-out of the State Second Pension (S2P) you will, up to State pension age, pay

reduced National Insurance contributions on your allowances between the Lower Earnings Limit and Upper

Accruals Point, unless you have opted to pay the married woman’s/widow’s reduced rate of National

Insurance. Be aware that from April 2016 the Government plans to remove the reduction in National Insurance

contributions for all contracted out pension schemes, but full details on how this will work have yet to be

finalised.

Can I make extra contributions to increase my benefits?

Members are able to increase their benefits by making additional voluntary contributions (AVCs). Additionally,

you may pay contributions into a personal pension plan or a stakeholder pension scheme. These options are

explained in more detail on pages 25 to 26.

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Is there a limit to how much I can contribute?

At the present time there is no overall limit on the amount of contributions you can pay (although there is a

limit on the amount you can pay into the Scheme’s AVC arrangement – see page 26). However, tax relief will

only be given on contributions up to 100% of your UK taxable earnings (or, if greater, £3,600 to a “tax relief at

source” arrangement, such as a personal pension or stakeholder pension scheme). There are also HM Revenue

and Customs controls known as the lifetime allowance and the annual allowance on all the pension savings

you can have before you become subject to a tax charge. Most scheme members’ pension savings will be less

than these allowances.

Can I transfer pension rights into my current LGPS Fund from a previous pension scheme?

The rules of the Scheme do not permit you to transfer pension rights into the LGPS from another pension

scheme or, indeed, from another local authority pension fund.

Points to Note

• If you have a deferred benefit from a previous period of councillor membership in the same LGPS Fund

you may opt to aggregate the earlier councillor membership with the current period of councillor

membership but only if you opt to do so within 12 months of rejoining the Scheme or such longer period

as your council allows. This is a council discretion; you can ask your council what their policy is on this

matter. Pension rights built up as an employee in England or Wales cannot be joined with rights built up a

councillor or mayor in England or Wales and vice versa.

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Retirement Benefits




When can I retire?

You can retire and receive your LGPS benefits in full once you have attained age 65. The Scheme also makes

provisions for the early payment of your LGPS benefits and these are detailed in the sections on Ill Health and

Early Retirement on pages 15 to 18.

The State pension age is currently age 65 for men. State pension age for women is currently being

increased to be equalised with that for men and will reach 65 by November 2018. .

State Pension Age equalisation timetable for women

Date of Birth New State Pension Age

Before 6 April 1950 60

6 April 1950 - 5 April 1951 In the range 60 - 61



6 April 1953 - 5 August 1953 In the range 63 - 64

6 August 1953 - 5 December 1953 In the range 64 - 65

The State Pension Age will then increase to 66 for both men and women from December 2018 to

October 2020.

Increase in State Pension Age from 65 to 66 for men and women


6 December 1953 - 5 October 1954 In the range 65 - 66

After 5 October 1954 66

Under current legislation the State Pension Age is due to rise to 67 between 2026 and 2028 and to

68 between 2044 and 2046. However, the government has announced plans to link rises in the

State Pension Age above age 67 to increases in life expectancy. To find out your State Pension Age

please visit https://www.gov.uk/calculate-state-pension.

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What are my retirement benefits?

When you retire, you will receive a pension and a tax-free lump sum from the LGPS. At State pension age you

will also receive the basic flat-rate State pension if you have paid sufficient National Insurance contributions

during your working life.

How much will my pension be?

Your pension is based on your total membership and your career average pay. The example below shows how

your pension is calculated by dividing your career average pay into 80ths and multiplying this figure by your

total membership to give you your annual pension.

How much will my lump sum be?

The lump sum automatically paid on retirement is three times your annual pension and is tax-free. Like your

pension, it is based on your career average pay and your total membership. The calculation for the lump sum

is 3/80ths of your career average pay for every year of total membership. When you draw your benefits you

will be able to exchange some of your pension to receive a bigger tax-free lump sum – further information on

giving up some of your pension to increase your lump sum is provided on page 13.

Example pension and lump sum calculation

On retirement at age 65, a Scheme member has 10 years and 204 days total membership and has a career

average pay of £16,200.

The annual pension is therefore: 1/80 x £16,200 x 10 204/365 = £2,138.18

The tax-free lump sum automatically paid is therefore: 3/80 x £16,200 x 10 204/365 = £6,414.53

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Can I give up some of my pension to increase my lump sum?

You will be able to exchange some of your pension for a bigger tax-free lump sum. You will be able to take up

to a maximum of 25% of the capital value of your pension benefits as a tax-free lump sum1. The lump sum

automatically paid on retirement as detailed above roughly equates to 15% of the capital value. Any amount

you take as a lump sum above the automatic lump sum would be achieved by exchanging part of your annual

pension for a one-off tax-free cash payment – for each £1 annual pension given up you will receive £12 lump

sum.

An option to take extra lump sum has to be made in writing before your benefits are paid. So that you have

plenty of time to make up your mind and seek financial advice if you wish, it is important you contact your

administering authority well in advance of your intended retirement date so they can provide you with more

details.

Your pension will be reduced in accordance with any election you make to receive extra lump sum. Any

subsequent spouse’s, civil partner’s and children’s long term pensions will not be affected if you decide to

exchange part of your pension for extra lump sum.

How will my pension be paid?

Monthly pension payments will be made direct into your bank or building society account. Similar

arrangements can also be made to pay your pension into your account should you move abroad. Further

information regarding payment of pensions is provided on retirement.

Will my pension increase?

After age 55, members’ pensions in payment will be increased each year in line with the appropriate cost of

living index. If you retire before age 55, the accumulated effect of inflation since you retired will be added to

your pension when you reach age 55 (but see page 16 regarding the increasing of ill health pensions.)

General Points to Note on Retirement Benefits

• If your pension benefits are subject to a Pension Sharing Order issued by the Court following a divorce or

dissolution of a civil partnership, or are subject to a qualifying agreement in Scotland, your benefits will be

reduced in accordance with the Court Order or agreement (see pages 33 and 34 for further details).

1 Provided the lump sum does not exceed £312,500 (2015/2016 figure) less the value of any other pension

rights you have in payment.

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• There are HM Revenue and Customs controls on the pension savings you can have before you become

subject to a tax charge when you draw them (over and above any tax due under the PAYE system on a

pension in payment). These are known as the lifetime allowance and the annual allowance.

• Under HM Revenue and Custom rules, if the LGPS makes an unauthorised payment or if you pay some or

all of your LGPS lump sum back into a pension arrangement, there will be a tax charge.

• If, after retiring, you return to employment or office within Local Government or employment with

another organisation that participates in the LGPS, your pension may be reduced or suspended in

accordance with the policy adopted by your administering authority. Under the LGPS, this is an

administering authority discretion and their policy with regard to it must be included in a policy

statement. Further details will be provided on request.

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Ill Health Retirement

What happens if I have to retire early due to ill health?

If you have at least three months total membership and an administering authority approved independent

registered medical practitioner certifies that you have become permanently unable (until your 65th

birthday) to

perform the duties of your office efficiently because of ill health or infirmity of mind or body, you will receive

your pension and lump sum immediately. The medical practitioner must be qualified in occupational health

medicine and must not have previously been involved in your case.

How is an ill health pension and lump sum calculated?

Ill health pensions and lump sums are calculated in the same way as detailed in the section on Retirement

Benefits, except that the total membership used in the calculation will be increased if your total membership

is five years or more. This is to reflect that you are having to retire early. The amount by which it will be

increased is shown in the table below.

Total Membership Total Membership After Increase Awarded

Less than 5 years Actual total membership only

Between 5 and 10 years Total membership doubled

Between 10 and 13 1/3 years Total membership increased to 20 years

Over 13 1/3 years Total membership increased by 6 2/3 years

Your increased membership, however, must not exceed the total membership you would have accrued had

you continued in service until age 65.

What if I do not qualify for an ill health pension and lump sum?

If you have less than three months total membership you will receive a refund of your contributions.

Points to Note on Ill Health Retirement

• Your pension benefits will not be increased if you have previously been awarded an ill health pension

under the Scheme.

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• When, at the date of retirement, the administering authority is satisfied that there is a life expectancy of

less than a year, the administering authority may commute the pension into a lump sum equal to a lump

sum of five times the annual amount of pension given up. No annual allowance tax charge will apply to

such a lump sum.

• Ill health pensions are increased each year in line with the appropriate cost of living index regardless of

age.

• You are exempt from the annual allowance if an independent registered medical practitioner certifies that

you are suffering from ill-health which makes it unlikely that you will be able (otherwise than to an

insignificant extent) to undertake gainful work (in any capacity) before reaching State pension age.

• See also General Points to Note on Retirement Benefits on page 13.

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Early Retirement




Can I retire early?

If you have at least three months total membership you can retire from office and receive payment of your

benefits at any time from age 60 onwards.

If you are aged 50 to 59 you may be able to retire from office and receive payment of your benefits

immediately but payment of benefits before age 60 is only possible with your council’s consent. This is a

council discretion and under the LGPS your council’s policy with regard to this must be included on their Policy

Statement.

Will my pension and lump sum be reduced if I retire early?

If you join the LGPS after 30 September 2006, retire and elect to receive benefits before age 65 your pension

and lump sum, initially calculated as detailed in the section on Retirement Benefits, will be reduced to take

account of being paid for longer. How much your benefits are reduced by depends on how early you draw

them.

The reduction is calculated in accordance with guidance issued by the Government Actuary from time to time.

The reduction is based on the length of time (in years and days) that you retire early – i.e. the period between

the date your benefits are paid to age 65. The earlier you retire, the greater the reduction.

As a guide, the percentage reductions, issued in March 2014, for retirements up to five years early between

and including the ages of 55 and 65 are shown in the table below. Where the number of years is not exact, the

reduction percentages are adjusted accordingly.

Pension Reduction % Lump Sum Reduction %

Years Early Males Females All Members

1 6 5 3

2 11 11 6

3 16 15 8

4 20 20 11

5 25 24 14

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If you were contributing to the scheme on 30 September 2006 some or all of your benefits paid early could be

protected from the reduction if you are a protected member.

Your council can agree not to make any reduction on compassionate grounds. This is a council discretion; you

can ask your council what their policy is on this matter.

If you voluntarily retire before age 65 you do not have to receive immediate payment of your benefits and can

defer them within the LGPS for payment at a later date as detailed on page 19.

Points to Note on Early Retirement

• If your council gives their consent to pay to immediate early retirement benefits before age 55, this may

result in a tax charge on your benefits. This would be in addition to the normal PAYE tax on your monthly

pension. Payment of benefits on or after age 55 will not result in this additional tax charge.

• If your council gives consent to immediate early retirement benefits on or after age 50 and before age 60

your pension will be increased each year in line with the appropriate cost of living index except that if the

benefits are paid before age 55 your pension will be paid at a flat rate until age 55. At that time it will be

increased by the accumulated effect of inflation since you retired.

• See also General Points to Note on Retirement Benefits on page 13.

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Late Retirement

What if I carry on working after age 65?

If you carry on in office after age 65 you will continue to pay into the scheme, building up further benefits. You

can receive your pension when you retire, or when you reach the eve of your 75th

birthday, whichever occurs

first.

If you draw your pension after age 65 the pension you have built up to age 65 will be increased to reflect the

fact that it will be paid for a shorter time.

Your pension has to be paid before your 75th

birthday.

See General Points to Note on Retirement Benefits on page 13.

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Protection for your Family

What benefits will be paid if I die in service?

If you die in service as a member of the LGPS, subject to the qualifying conditions detailed, the benefits shown

below are payable.

• A lump sum death grant

A lump sum death grant of two times your career average pay is payable no matter how long you have

been a member of the LGPS, provided you are under age 75 at the date of death.

• A spouse's or civil partner’s pension

A short-term pension, at an annual rate equal to your career average pay, is paid to your spouse or civil

partner for three months immediately following your death, no matter how long you have been a

member of the LGPS. If there are eligible children (any of whom are in the care of your spouse or civil

partner) this pension is paid for six months.

If you should die in service having built up three months total membership then the LGPS will also pay a

long-term pension to your spouse or civil partner commencing when the short-term pension ends. The

long-term pension is generally half the pension you would have received if you had retired early due to ill

health on the date of death.

• Pensions for eligible children

Children's pensions are payable for so long as eligible children remain following your death, no matter

how long you have been a member of the LGPS.

Eligible children are your children. They must, at the date of your death:

• be your natural child (who must be born within 12 months of your death), or

• be your adopted child, or

• be your step-child or a child accepted by you as being a member of your family (this doesn’t include a

child you sponsor for charity) and be dependent on you.

Eligible children must meet the following conditions:

• be under 18, or

• be aged 18 or over and under 23, and be in full-time education or vocational training (although your

administering authority can continue to treat the child as an eligible child notwithstanding a break in

full-time education or vocational training), or

• be unable to engage in gainful employment because of physical or mental impairment and either:

o has not reached the age of 23, or

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o the impairment is, in the opinion of an independent registered medical practitioner, likely to

be permanent and the child was dependent on you at the date of your death because of that

mental or physical impairment.

A long term pension is payable at the rate of one quarter of your notional pension entitlement if there is

one eligible child or at the rate of one-half if there are two or more eligible children. If no spouse’s or civil

partner’s long-term pension is payable, the pension is payable at the rate of one-third where there is one

eligible child and at the rate of two-thirds where there is more than one eligible child. The pension may be

reduced if a child is receiving pay over and above a set level while in full-time training for a trade,

profession or vocation.

Your notional pension entitlement is calculated by reference to the lesser of the total membership you

would otherwise have accrued by age 65, or 10 years. If at the date of death you have already built up

five or more years' total membership, and you had not previously retired from the LGPS on health

grounds, the notional amount will, if higher, be calculated by reference to the total membership you

would have had if you had retired due to ill health.

Normally, payment of the children's long-term pension will commence when the spouse's or civil

partner’s short-term pension ceases. If no spouse's or civil partner’s short-term pension is payable,

however, a children's short-term pension, equal to the amount that would have been paid to a spouse or

civil partner, is paid for six months. If the children are not in the care of the surviving spouse or civil

partner, a children’s short term pension is paid for three months. In both cases, commencement of the

children's long-term pension is normally deferred until the short-term pension ceases.

What benefits will be paid if I die after retiring on pension?

If you die after retiring on pension, your benefits will no longer be payable. Your spouse, civil partner, next-of-

kin or person dealing with your Estate must immediately inform the Pension Section of the administering

authority whose address is given on the inside front cover of this booklet of your date of death as otherwise

an overpayment could occur.

The following benefits may then be payable:

• A lump sum death grant

A lump sum death grant will be payable if the death occurs in the first five years on pension and you are

under age 75 at the date of death. The sum payable will be five times your annual pension reduced by the

pension already paid to you up to the date of death.

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• A spouse's or civil partner’s pension

A spouse or civil partner will receive a short-term pension for the three months following your death, or

six months if one or more eligible dependent children are in the spouse’s or civil partner’s care. This will

be equal to the pension you were receiving or would have received but for a reduction as a result of early

retirement or had it not been paid as a lump sum due to exceptional ill health. After that the spouse or

civil partner will receive a long-term pension generally equal to half the pension you were receiving or

would have received but for a reduction as a result of early retirement or as a result of an exchange of

pension for an increased lump sum, or had it not been paid as a lump sum due to exceptional ill health. If

you married after retirement and you had retired on the grounds of permanent ill health, the spouse's

pension will only be based on half of your basic pension i.e. excluding any enhancement to your pension

on account of ill health retirement (see page 15). If you entered into a civil partnership after retirement,

the civil partner’s pension will be half your pension.

• Pensions for eligible children

Children's pensions are payable for so long as eligible children remain following your death, as detailed on

page 20. The pension is not calculated, however, against a notional entitlement. It is calculated instead

against the pension you were receiving at the date of your death or would have received but for a

reduction as a result of early retirement or as a result of an exchange of pension for an increased lump

sum, or had it not been paid as a lump sum due to exceptional ill health. If your pension was originally

calculated on a total membership of less than the shorter of ten years or the amount you could have

accrued had you continued working to age 65, this amount is used to increase your pension for the

purpose of calculating the children’s pension only.

Points to Note

• Your administering authority has the discretion to pay the lump sum death grant to your nominee or

personal representatives or to any person who appears, at any time, to have been your relative or

dependant. The LGPS allows you to express your wish as to who you would like any death grant to be paid

to by completing and returning an expression of wish form. If any part of the death grant has not been

paid by the second anniversary of your death, it must be paid to your personal representatives, i.e. to your

Estate. If you have not already made your wishes known, or you wish to change a previous expression of

wish, a form is available from your administering authority.

• Your personal representatives will need to inform HM Revenue and Customs if, with the lump sum death

grant, the value of all your pension benefits (not including any spouse’s, civil partner’s or dependant’s

pensions) exceeds the HM Revenue and Customs lifetime allowance. Under HM Revenue and Customs

rules, any excess will be subject to a recovery tax charge. Most scheme members’ pension savings will be

significantly less than the allowance.

23

• Spouses', civil partners’ and children's pensions are increased each year in line with the appropriate cost

of living index regardless of age.

• Spouse's and civil partner’s pensions are payable for life even if your spouse or civil partner remarries,

enters into a new civil partnership or cohabits.



reduced in accordance with the Court Order or agreement. In consequence, if you remarry or enter into a

new civil partnership, any spouse's pension or civil partner’s pension payable following your death will

also be reduced (see pages 20 and 22 for further details). Benefits payable to eligible children will not,

however, be reduced because of a pension share.

24

Increasing your Benefits

How can I increase my benefits?

To increase the value of the benefits that you and your dependants receive, you may:

• make an additional voluntary contributions arranged through the LGPS (in-house AVCs)

All local government pension funds have an AVC arrangement in which you can invest money, deducted

directly from your allowances, through an AVC provider (often an insurance company or building society).

If you choose to pay AVCs under the LGPS, the AVCs are invested separately, in funds managed by the AVC

provider. You have your own personal account that, over time, builds up with your contributions and the

returns on your investment, and will be available to you when you retire. You can often choose which

investment route you prefer.

You decide how much you can afford to pay. You can pay up to 50% of your pay into an in-house AVC in

each office you hold where you pay into the LGPS.

AVCs are deducted from your allowances, just like your normal contributions. Your LGPS and AVC

contributions are deducted before your tax is worked out, so, if you pay tax, you receive tax relief

automatically through the payroll. You qualify for tax relief (normally at your highest rate) on all pension

contributions up to 100% of your taxable earnings, including your normal contributions – but see Points to

Note on page 26. Deductions start from the next available pay day after your election has been accepted

and you may vary or cease payment at any time whilst you are paying into the LGPS.

At retirement any of your AVC fund which you do not take as a lump sum is used to buy you an annuity.

An insurance company, bank or building society of your choice takes your AVC fund and pays you a

pension in return. You can do this at the same time you draw your LGPS benefits or you may be able to

choose to defer buying an annuity until any time up to to the eve of your 75th

birthday. If you carry on

paying into the LGPS after age 65 you cannot buy an annuity until you retire, or you reach the eve of your

75th

birthday if this is earlier.

An annuity is paid completely separately from your LGPS benefits.

The amount of annuity depends on several factors, such as interest rates and your age. You also have

some choice over the type of annuity, for example whether you want a flat-rate pension or one that

increases each year, and whether you also want to provide for dependants’ benefits in the event of your

death.

25

Annuities are subject to annuity rates which in turn are affected by interest rates. When interest rates rise,

the organisation selling annuities is able to obtain a greater income from each pound in your AVC fund,

and therefore can provide a higher pension. A fall in interest rates reduces the pension which can be

purchased.

If you draw your AVCs at the same time as your LGPS pension, you may be able to take some or all of your

AVCs as a tax-free lump sum provided, when added to the automatic LGPS lump sum as detailed on page

12, it does not exceed 25% of the overall value of your LGPS benefits (including your AVC fund) 2

. If you

retire and draw your AVCs later, you can then normally only have up to 25% of your AVC fund as a lump

sum.

You can also pay AVCs to increase your death in service lump sum cover over and above the two times

career average pay provided by the LGPS, or to provide additional dependants’ benefits.

• contribute to a concurrent personal pension plan or stakeholder pension scheme

You may be able to make your own arrangements to pay into a personal pension plan or stakeholder

pension scheme at the same time as paying into the LGPS. With these arrangements, you choose a

provider, usually an insurance company. You may want to consider their charges, alternative investments

and past performance when you do this.

You choose how much to pay into the arrangement. You can pay up to 100% of your total UK taxable

earnings in any one tax year into any number of concurrent pension arrangements of your choice (or, if

greater, £3,600 to a “tax relief at source” arrangement, such as a personal pension or stakeholder pension

scheme) and be eligible for tax relief on those contributions.

If you pay into a personal pension plan or stakeholder pension scheme, the contributions you make to it

are invested in funds managed by an insurance company. You have your own personal account that, over

time, builds up with your contributions and the returns on your investment, and will be available later in

your life to convert into additional benefits. You can often choose which investment route you prefer.

When the benefits are paid, you will be able to take up to 25% of your Fund as a tax-free lump sum3, with

the remainder available to buy you an annuity from an insurance company, bank or building society.

2 Provided the total lump sum does not exceed £312,500 (2015/2016 figure) less the value of any other

pension rights you have in payment.

3 Provided the lump sum does not exceed £312,500 (2015/2016 figure) less the value of any other pension

rights you have in payment.

26

The amount of annuity depends on several factors, such as interest rates and your age. You also have

some choice over the type of annuity, for example whether you want a flat-rate pension or one that

increases each year, and whether you also want to provide for dependants’ benefits in the event of your

death.

Annuities are subject to annuity rates which are affected by interest rates. When interest rates rise, the

organisation selling annuities is able to obtain a greater income from each pound in your AVC fund, and

therefore can provide a higher pension. Conversely a fall in interest rates reduces the pension which can

be purchased.

Points to Note

• You can, if you wish, pay up to 100% of your UK taxable earnings in any one tax year into any number

of pension arrangements of your choice (or, if greater, £3,600 to a “tax relief at source” arrangement,

such as a personal pension or stakeholder pension scheme) and be eligible for tax relief on those

contributions. However, there are also controls, known as the lifetime allowance and the annual

allowance on all the pension savings you can have before you become subject to a tax charge. Most

scheme members’ pension savings will be less than these allowances.

• If you have (or have applied for) lifetime allowance enhanced protection, fixed protection, fixed

protection 2014 or individual protection 2014 from HM Revenue and Customs you will lose that

protection if you pay contributions into a money purchase pension arrangement (e.g. pay LGPS in-

house AVCs or pay into a stakeholder or personal pension plan). You may not lose this protection if

you are paying AVCs at 5 April 2006 purely for extra life cover and the terms of the policy have not

varied significantly since then.

• The maximum amount of Scheme AVCs you can pay is 50% of your pay in each office you hold where

you are a member of the LGPS.

• If you elect to pay AVCs for additional death benefits, you may be required to satisfy certain medical

conditions. You may be asked to complete a medical questionnaire and may be asked to undergo a

medical examination at your own expense before your election is accepted.

• Further information on increasing your Scheme benefits is available by contacting your administering

authority.

27

Ceasing to be a Councillor before Retirement




What happens to my benefits if I cease to be a councillor participating in the LGPS?

In these circumstances you may choose, from a number of options, what happens to the benefits you have

accrued in the LGPS. The options available to you are described in the table below.

If you have:

Less than three months total membership

At least three months total membership

Either Either

To take a refund of your contributions less a

deduction for tax and the cost, if any, of

buying you back into the State Second

Pension Scheme (S2P).

Or

To transfer an amount equal to the cash

equivalent of your pension benefits into your

new employer’s scheme provided they are

willing and able to accept it, into a personal

pension plan, into a stakeholder pension

scheme, or into a ‘buy-out’ insurance policy

(but not to the LGPS in England or Wales

unless you again participate in the same LGPS

fund as a councillor member).

Or

To defer making a decision until you either

re-join the same LGPS fund as a councillor

member, or join a new pension scheme, or

want to take a refund of contributions.

To leave your accrued benefits in the

LGPS. Your pension and lump sum will be

calculated as described in the section on

Retirement Benefits using the length of

your total membership up to the date

that you left the Scheme. This is known

as having deferred benefits

Or

To transfer an amount equal to the cash

equivalent of your pension benefits into

your new employer’s scheme provided

they are willing and able to accept it,

into a personal pension plan, into a ‘buy-

out’ insurance policy or into a

stakeholder pension scheme (but not the

LGPS in England or Wales unless you

again participate in the same LGPS fund

as a councillor member).

28

Note: it may be possible to make a transfer payment to an overseas pension scheme or arrangement that

meets HM Revenue and Customs conditions.

What will happen to my benefits if I choose to defer them?

Deferred benefits are where we work out the value of your benefits when you leave the LGPS and hold them in

the LGPS for you until either you decide to transfer them to another pension scheme, or they are due to be

paid.

Deferred benefits become payable at age 65 (unless you opt to defer payment beyond that age), but may be

put into payment at any age earlier than 65 in the event of ill health, without reduction. You can also elect to

receive your benefits early, on or after age 50 and before age 60 with your council’s consent as detailed on

page 17, or at or after age 60, without your council’s consent. Your benefits (unless being paid on the grounds

of permanent ill health) will be reduced as detailed on page 17 if paid before age 65 to take account of early

payment (although some or all of your benefits could be protected from the reduction if you were contributing

to the scheme on 30 September 2006 and you are a protected member). Your former council can agree not to

make any reduction on compassionate grounds. The percentages will differ from those shown where benefits

are paid with the former council’s consent before age 55. Please contact your administering authority for

details of the percentage reductions that apply when deferred benefits are put into payment before age 55 for

reasons other than ill health.

What will happen if I die before receiving payment of my deferred benefits?

Should you die while your benefits are deferred your retirement lump sum will be paid as a death grant.

Payment will be made as detailed on page 20.

A spouse's or civil partner’s long-term pension will also become payable. The widow's, widower’s or civil

partner’s pension is payable at the rate of one-half of your deferred pension.

Long-term children's pensions will be payable for so long as eligible children remain following your death, as

detailed on page 20. The pension is not calculated, however, against a notional entitlement. It is calculated

instead against the pension you would have received had your deferred benefits been put into payment on the

date of your death. If your pension would have been calculated on a total membership of less than the shorter

of ten years or the amount you could have accrued had you continued in office to age 65, that amount is used

to increase your pension for the purpose of calculating the children’s pension only.

29

What will happen if I wish to transfer my LGPS pension benefits to another (non LGPS) scheme?

If you are interested in transferring the value of your LGPS pension rights to another occupational pension

scheme (outside of the Local Government Pension Scheme in England and Wales), to a personal pension plan,

to a stakeholder pension scheme or to a buy-out insurance policy you can ask for a transfer value quotation to

be provided (known as the ‘cash equivalent’ transfer value). Under provisions introduced by the Pensions Act

1995, a quotation must be guaranteed for a period of three months from the date on which it was calculated

(the ‘Guarantee Date’). A written option to proceed with the guaranteed transfer value must be received

within the three month guaranteed period. If you opt to proceed, the normal time limit for the Scheme to pay

the guaranteed transfer value will be six months from the ‘Guarantee Date’. If the Scheme does not make

payment within this period it will need to recalculate the value as at the actual date of payment and pay the

recalculated value or, if it is greater, the original value plus interest.

Transfer values are calculated in accordance with the terms and conditions of the Local Government Pension

Scheme Regulations 1997 (as amended) which comply with requirements of the Pensions Schemes Act 1993.

Points to Note

• A refund of contributions cannot be paid if you already have a deferred benefit in the LGPS in England or

Wales.

• Only Scheme members who leave more than one year before age 65 can transfer their pension rights. The

latest an option to transfer can be made is one year before age 65 or six months after leaving the Scheme,

if this is later.

• You may wish to obtain independent financial advice before you make a decision to transfer your deferred

benefits to a personal pension plan, stakeholder pension scheme or buy-out insurance policy, as you will

be bearing all of the investment risk, which could significantly affect your future pension benefits.

• When you draw your benefits from the LGPS you will be given the option to exchange some of your

pension for a bigger tax-free lump sum (see page 13 for further details).

• There are HM Revenue and Customs controls on all your pension savings you can have before you become

subject to a tax charge - not including any state retirement pension, state pension credit or any spouse’s,

civil partner’s or dependant’s pension you may be entitled to. There are two main allowances for pension

savings – an annual allowance and a lifetime allowance. Most scheme members’ pension savings will be

less than these allowances.

30

• If your council gives their consent to the early payment of your benefits before age 55, this may result in

a tax charge on your benefits. This would be in addition to the normal PAYE tax on your monthly pension.

Payment of benefits on or after age 55 will not result in this additional tax charge.

• Deferred benefits (including the lump sum benefits) are increased each year in line with the appropriate

cost of living index. However, should your deferred benefits be brought into payment before age 55 on

the grounds of permanent ill health, pensions increase is only payable before your 55th birthday if you

are certified as being incapable of engaging in any regular full- time work; if you are not so certified, or

your deferred benefits are brought into payment with your former authority's consent before age 55, the

benefits will be paid at a flat rate until age 55. Then, at age 55, the benefits will be increased by the

accumulated effect of inflation since they were brought into payment.

• Spouse's and civil partner’s pensions are payable for life even if your spouse or civil partner remarries,

enters into a new civil partnership or cohabits. Spouse's, civil partner’s and children's pensions are

increased each year in line with the appropriate cost of living index regardless of age.



reduced in accordance with the Court Order or agreement. In consequence, if you have deferred benefits

and you remarry or enter into a new civil partnership, any spouse's or civil partner’s pension payable

following your death will also be reduced (see pages 33 and 34 for further details) but benefits payable to

eligible children will not be reduced because of a pension share.

• Further information on the options available will be sent to you on leaving.

31

Opting-out of the LGPS




Can I opt-out of the LGPS?

You can leave the LGPS at any time by giving your council notice in writing. An election to opt-out becomes

effective from the end of the payment period during which you gave notification, unless your notification

specifies a later date. You are recommended to obtain advice before opting-out of the LGPS.

If you opt-out the same options are available to you as detailed in the section on Ceasing to be a Councillor

before Retirement (except that deferred benefits cannot be paid until you have ceased to be a councillor or, if

earlier, age 75).

Can I re-join the LGPS at a later date?

If you opt-out once, you can re-join the LGPS at any time whilst you remain an eligible councillor.

If you opt-out of the LGPS more than once, unless you elect to re-join the Scheme within three months of

commencing as an eligible councillor with a new council, you will only be allowed to re-join at the discretion

of your council. You can ask your council what their policy is on this matter.

Points to Note

• You may wish to obtain independent financial advice before you make a decision to opt-out of the LGPS.

32

Some other LGPS Provisions

The LGPS requires your administering authority to:

• pay interest on lump sum benefits that are paid more than one month after they should have been paid.

• pay interest on pensions that are paid more than a year after they should have been paid.

• pay interest on refunds of contributions that are paid more than a year after the date you left the LGPS.

• issue annual benefit statements to Scheme members (other than to pensioners).

• have a statement setting out their policy on communicating with scheme members, members’

representatives, prospective members and employers.

The LGPS allows your administering authority to:

• commute small pensions into single lump sum payments. The circumstances where this may happen are

restrictive, particularly if you have other pension benefits.

The LGPS allows your authority to:

• reduce pension benefits if a LGPS member leaves as a result of a criminal, negligent or fraudulent act, or

omission as a result of which you have incurred some monetary obligation to your employer.

• forfeit a LGPS member’s pension rights if the Secretary of State for Communities and Local Government

agrees and the member has been convicted of a serious offence connected with their office.

The LGPS does not allow you to:

• assign your benefits. Your LGPS benefits are strictly personal and cannot be assigned to anyone else or

used as security for a loan.

33

Pensions and Divorce or Dissolution of a Civil Partnership

Under the LGPS, if you get divorced or a civil partnership is dissolved, you may wish to note that:

• your ex-spouse or ex-civil partner will cease to be entitled to a spouse’s or civil partner’s pension should

you die before them.

• any children’s pension payable to an eligible child in the event of your death will not be affected by your

divorce or dissolution.

• If you have said that you would like your ex-spouse or ex-civil partner to receive any lump sum death grant

payable on your death by completing and returning an expression of wish form, this will remain in place

unless you change it. The Court may, however, issue an Earmarking Order stating that all or part of any

lump sum death grant is payable to your ex-spouse or ex-civil partner.

You should also note that in proceedings for divorce, judicial separation or nullity of marriage, or for

dissolution, separation or nullity of a civil partnership, you will be required to obtain the cash equivalent value

of your pension rights from the administering authority which the Court will take into account in the divorce

or dissolution settlement. In Scottish divorces / dissolution, only the pension rights built up during the period

of the marriage / civil partnership are taken into account.

The Court may offset the value of your pension rights against your other financial assets in the divorce /

dissolution settlement or it may issue a Pension Sharing Order or an Earmarking Order against your pension.

If the Court issues an Earmarking Order, the Order may require that when your benefits come into payment

your ex-spouse / ex-civil partner should receive one, or a combination, of the following benefits:

• all, or part, of your pension (this does not apply to divorces/ dissolutions in Scotland)

• all, or part, of your lump sum retirement grant

• all, or part, of any lump sum paid in the event of your death.

An Earmarking Order against pension payments, but not lump sums (unless the Order directs otherwise), will

automatically lapse if your former spouse or civil partner remarries or enters into a civil partnership and the

full pension would be restored to you. Pension payments to your former spouse or civil partner would cease

on your death. If the Court issues a Pension Sharing Order, or you are subject to a qualifying agreement in

Scotland, part of your benefits are transferred into your ex-spouse's or ex-civil partner's possession. Your

pension, your lump sum and the contingent spouse's / civil partner’s pension, but not the contingent

children's pensions, will be reduced accordingly, and your ex-spouse / ex-civil partner will hold benefits in his /

34

her own right which can be left in the Scheme to be payable from, normally, age 65, or can be drawn on or

after age 60 and before age 65 with a reduction for early payment, or transferred to another qualifying

pension scheme. The reduction to your benefits is known as a Pension Debit. The amount of the Pension Debit

will be increased in line with the rise in the appropriate cost of living index(es) between the date the Debit was

first calculated and the date your benefits are paid. When your benefits become payable, the revalued

amount of the Pension Debit will be deducted from your retirement benefits in accordance with guidance from

the Government Actuary. In assessing the value of your benefits against your lifetime allowance, the reduced

value after the Pension Debit will be used. You may be able to pay Additional Voluntary Contributions, or

contribute to a concurrent personal pension plan or stakeholder pension scheme in order to make up for the

benefits 'lost' following a Pension Share.

All correspondence received by the administering authority in connection with divorce or dissolution

proceedings will be acknowledged in writing. If no acknowledgement is received, you should contact the

administering authority to ensure that your correspondence has been received.

The cost of supplying information and complying with any court order imposing obligations on the LGPS will be

recovered from you and/or your ex-spouse or ex-civil partner in accordance with a schedule of charges

published by the administering authority.

Points to Note

If your pension benefits in the LGPS are reduced following a Pension Sharing Order then, for the purposes of

calculating the value of your pension savings in the LGPS for the annual allowance, the reduction in your

benefits is ignored in the year that the Pension Sharing Order is applied to your benefits.

35

Scheme Administration

Who runs the LGPS?

The LGPS is run by administering authorities, for example County Councils, in accordance with regulations

approved by Parliament. Each administers their own Fund, into which all contributions are paid. Every three

years, independent actuaries carry out a valuation of each Fund and set the rate at which the participating

employers must contribute to fully fund the payment of Scheme benefits for that Fund's membership.

How is the Scheme amended?

The Scheme regulations for councillors are made under the Superannuation Act 1972. Changes to the rules are

discussed at national level by employee and employer representatives but can only be amended with the

approval of Parliament. Your administering authority must keep you informed of any changes that are made.

Are the Scheme benefits protected?

As the Scheme is set up by statute, payment of the Scheme benefits is guaranteed by law.

What other legislation applies to the Scheme?

The Scheme is a registered public service scheme under Chapter 2 of Part 4 of the Finance Act 2004. It

achieved automatic registration by virtue of Part 1 of Schedule 36 of that Act (because the Scheme was,

immediately before 6th April 2006, both a retirement benefits scheme approved under Chapter I of Part XIV of

the Income and Corporation Taxes Act 1988 and a relevant statutory scheme under section 611A of that Act).

This means, for example, that you receive tax relief on your contributions. It complies with the relevant

provisions of the Pension Schemes Act 1993, the Pensions Act 1995 and the Pensions Act 2004.

How can I check the accuracy of my pension records?

To maintain the security of any information about you, your administering authority is registered under the

current Data Protection Acts. You can check that your computerised personal record is accurate, although we

may charge a small fee.

What other information am I entitled to?

You are entitled to obtain a copy of the Local Government Pension Scheme Regulations 1997 (Statutory

Instrument Number 1997 No.1612) and subsequent amendments. The Regulations are available from The

Stationery Office. A current version, including all amendments, is available on the Local Government Pension

Committee’s website at http://timeline.lge.gov.uk/. A copy of the Regulations may be inspected at the offices

of your administering authority. In addition, you are entitled to view, and take copies of, your administering

authority’s Annual Report and Accounts.

36

Help with Pension Problems

Who can help me if I have a query or complaint?

If you are in any doubt about your benefit entitlements, or have a problem or question about your LGPS

membership or benefits, please contact the Pension Section of your administering authority. They will seek to

clarify or put right any misunderstandings or inaccuracies as quickly and efficiently as possible.

If you are still dissatisfied with any decision made in relation to the Scheme you have the right to have your

complaint reviewed under the Internal Disputes Resolution Procedure. There are also a number of other

regulatory bodies that may be able to assist you.

The various ways you can ask for help with a pension problem are:

• Internal Disputes Resolution Procedure

In the first instance, you should write to the person nominated by the council that made the decision about

which you wish to appeal. You must do this within six months of the date of the notification of the decision

or the act or omission about which you are complaining (or such longer period that the nominated person

considers reasonable). The nominated person will consider your complaint and notify you of his/her

decision. If you are still dissatisfied with that person’s decision (or their failure to make a decision), you

may, within six months of the date of the decision apply to the administering authority to have the

decision reconsidered.

A leaflet explaining the Internal Disputes Resolution Procedure and relevant time limits is available from

your administering authority’s Pension Section.

To avoid any unnecessary effort on your behalf we would welcome the opportunity to attempt to resolve

with you the matter with which you are dissatisfied before you resort to a formal complaint.

• The Pensions Advisory Service (TPAS)

TPAS is available at any time to assist members and beneficiaries of the Scheme in connection with any

pensions query they may have or any difficulty which they cannot resolve with the scheme administrator.

TPAS can be contacted at:

11 Belgrave Road, London, SW1V 1RB Telephone 0845 601 2923

Website: www.pensionsadvisoryservice.org.uk

• Pensions Ombudsman

In cases where a complaint or dispute has not been satisfactorily resolved through the Internal Disputes

Resolution Procedure or with the help of TPAS, an application can be made to the Pensions Ombudsman

37

within three years of the event that gave rise to the complaint or dispute. The Ombudsman can investigate

and determine any complaint or dispute involving maladministration of the Scheme or matters of fact or

law and his or her decision is final and binding. Matters where legal proceedings have already started

cannot be investigated.

The Pensions Ombudsman can be contacted at:

11 Belgrave Road, London, SW1V 1RB Telephone 0207 630 2200

Website: www.pensions-ombudsman.org.uk

• The Pensions Regulator

This is the regulator of work-based pension schemes. The Pensions Regulator has powers to protect

members of work-based pension schemes and a wide range of powers to help put matters right, where

needed. In extreme cases, the regulator is able to fine trustees or employers, and remove trustees from a

scheme.

You can contact the Pensions Regulator at:

Napier House, Trafalgar Place, Brighton, BN1 4DW Telephone 0845 6000707

Website: www.thepensionsregulator.gov.uk

How can I trace my pension rights?

The Pension Tracing Service holds details of pension schemes, including the LGPS, together with relevant

contact addresses. It provides a tracing service for ex-members of schemes with pension entitlements (and

their dependants) who have lost touch with previous schemes. All occupational and personal pension schemes

have to register if the pension scheme has current members contributing to the scheme or people expecting

benefits from the scheme. If you need to use this tracing service please write to:

The Pension Tracing Service

The Pension Service

Tyneview Park

Whitley Road

Newcastle upon Tyne

NE98 1BA Telephone 0845 6002 537

www.gov.uk/find-lost-pension

Don’t forget to keep your pension providers up to date with any change in your home address.

38

Pension Terms Defined

Administering authority

Please see the section entitled Who runs the LGPS? on page 35.

Annual Allowance

The annual allowance is the amount by which the value of your pension benefits may increase in any one year

without you having to pay a tax charge. For the LGPS, the pension savings year runs from 1 April to 31 March

and is called the pension input period. The annual allowance for 2015/2016 is £40,000. Generally speaking,

the assessment covers any pension benefits you may have in all tax-registered pension arrangements where

you have been an active member of the scheme during the tax year i.e. you have paid contributions during the

tax year (or your employer has paid contributions on your behalf).

You would only be subject to an annual allowance tax charge if the value of your pension savings for a tax year

increase by more than £40,000. However, a three year carry forward rule allows you to carry forward unused

annual allowance from the last three tax years. This means that even if the value of your pension savings

increase by more than £40,000 in a year you may not be liable to the annual allowance tax charge. For

example, if the value of your pension savings for a tax year increase by £50,000 (i.e. by £10,000 more than the

annual allowance) but in the three previous years had increased by £25,000, £28,000 and £30,000, then the

amount by which each of these previous years fell short of the annual allowance for those three years would

more than offset the £10,000 excess pension saving in the current year. There would be no annual allowance

tax charge to pay in this case. To carry forward unused annual allowance from an earlier year you must have

been a member of a tax registered pension scheme in that year. Most people will not be affected by the

annual allowance tax charge because the value of their pension saving will not increase in a tax year by more

than £40,000 or, if it does, they are likely to have unused allowance from previous tax years that can be carried

forward. If, however, you are affected you will be liable to a tax charge (at your marginal rate) on the amount

by which the value of your pension savings for the tax year, less any unused allowance from the previous three

years, exceeds £40,000.

Working out whether you are affected by the annual allowance is quite complex, but this should help you

work out your general position. In general terms, the increase in the value of your pension savings in the LGPS

in a tax year is calculated by working out the value of your benefits immediately before the start of the input

period (1 April), increasing them by inflation, and comparing them with the value of your benefits at the end of

the input period (31 March). In a defined benefit scheme like the LGPS the value of your benefits is calculated

by multiplying the amount of your pension by 16 and adding any lump sum you are automatically entitled to

from the pension scheme.

If the difference between:

39

a) the value of your benefits immediately before the start of the input period (the opening value) and

b) the value of your benefits at the end of the input period (the closing value),

plus any contributions you have paid into the scheme’s AVC arrangement in that year, is more than £40,000,

you may be liable to a tax charge.

The method of valuing benefits in other schemes may be different to the method used in the LGPS.

It is important to note that the assessment covers any pension benefits you may have where you have been an

active member during the tax year, not just benefits in the LGPS. If you exceed the annual allowance in any

year you are responsible for reporting this to HMRC on your self-assessment tax return. Your administering

authority will be able to tell you how much the value of your LGPS benefits have increased during an input

period, plus the amount of any AVCs you may have paid during the input period.

If you have an annual allowance tax charge that is more than £2,000 and your pension savings in the LGPS

alone have increased in the tax year by more than £40,000 you may be able to opt for the LGPS to pay some or

all of the tax charge on your behalf. The tax charge would then be recovered from your pension benefits. If you

want the LGPS to pay some or all of an annual allowance charge on your behalf, you must give your

notification no later than 31 July in the year following the end of the tax year to which the annual allowance

charge relates. However, if you are retiring and become entitled to all of your benefits from the LGPS and you

want the LGPS to pay some or all of the tax charge on your behalf from your benefits, you must tell your

administering authority before you become entitled to those benefits. Your administering authority will be

able to tell you more about this and the time limits that apply.

The general exemption from the annual allowance for the relatively small number of members who applied to

HMRC for, and received, an enhanced protection certificate ceased on 6 April 2011.

Career average pay

Career average pay is the pay for each year or part year ending 31 March adjusted (other than the final years

pay) by the change in the cost of living, as measured by the appropriate index(es), between the end of the

relevant year and the last day of the month in which the councillor member’s active membership of the

Scheme ends. The aggregate of each years revalued pay is then divided by the total number of years and part

years to arrive at the career average pay. This is the figure used to calculate your pension benefits.

Example

Assume that a councillor has been in the Scheme for 3 years, from 1 May 2003 to 30 April 2006. The average

pay calculation would be calculated as follows:

Pay from 1 May 2003 to 31 March 2004:

£8,250 plus inflation from 1 April 2004 to 30 April 2006 = £8,781

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Pay from 1 April 2004 to 31 March 2005:


Pay from 1 April 2005 to 31 March 2006:


Pay from 1 April 2006 to 30 April 2006:

£800 = £ 800

Career average pay = £8,781 + £9,592 + £9,573 + £800 divided by 3 = £9,582

Should you reach age 65 and continue in employment please refer to page 19.

Civil Partnership

A civil partnership is a relationship between two people of the same sex ("civil partners") which is formed

when they register as civil partners of each other.

Contracted-out

The LGPS is contracted-out of the State Second Pension Scheme (S2P). This means that, up to State pension

age, you pay reduced National Insurance contributions between the Lower Earnings Limit and the Upper

Accruals Point, unless you have opted to pay the married woman’s/widow’s reduced rate of National

Insurance, and that you do not earn a pension under S2P. Instead, the LGPS must guarantee to pay you a

pension that in general is as high as you would have earned had you been in the S2P. The LGPS must meet a

minimum reference scheme test prescribed under the Pensions Act 1995.

Discretion

This is the power given by the LGPS to enable your council or your administering authority to choose how they

will apply the Scheme in respect of certain provisions. Under the LGPS your council or your administering

authority are obliged to consider how to exercise their discretion and, in respect of some (but not all) of these

discretionary provisions, to have a written policy statement on how they will apply their discretion. They have

a responsibility to act with ‘prudence and propriety’ in formulating their policies and must keep them under

review. You may ask your council or your administering authority what their policy is in relation to a

discretion. See also ‘Policy Statement’ on page 44.

Eligible councillor (from 1 April 2014)

This is a councillor who is eligible for membership of the LGPS in accordance with the scheme of allowances

published by a Welsh county council or county borough council. If you are a councillor or elected mayor in

England who was a member of the LGPS on the 31 March 2014 you can continue to pay pension contributions

and build up pension benefits in the LGPS until the end of your current term of office (or age 75 if earlier).

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Enhanced protection

You could register for enhanced protection (as well as primary protection) if the value of your pension benefits

at 5 April 2006 was more than the 2006/2007 lifetime allowance of £1.5million. You could also register for

enhanced protection if you believed the value of those benefits might in the future be more than the standard

lifetime allowance or if you believed your pension benefits in any one year would increase by more than the

annual allowance. Under enhanced protection you will not pay tax on benefits in excess of the lifetime

allowance provided your benefits at retirement do not exceed the value of your benefits at 5 April 2006 as

increased after then, in general terms, by the greater of 5% per annum, the increase in the cost of living or

increases in your pensionable pay. If the limit is exceeded you will pay tax on the excess. You will lose

enhanced protection if you pay contributions into a money purchase pension arrangement (e.g. pay into the

LGPS arranged AVC facility) or if you start a new pension arrangement, or if you transfer your LGPS benefits to

another defined benefit pension scheme. You can also voluntarily give up enhanced protection by giving notice

that you no longer wish to keep it.

If you lose enhanced protection you must notify HMRC within 90 days. Failure to do so could result in a fine of

up to £3,000.

To have enhanced protection you must have registered for it with HM Revenue and Customs by 5 April 2009.

Fixed Protection

Because the lifetime allowance reduced to £1.5 million in 2012/13 a new fixed protection was introduced. You

can't have fixed protection if you have either primary or enhanced protection. With fixed protection your

lifetime allowance is fixed at £1.8 million.

The maximum tax free lump sum you can take on retirement is the lesser of:

• 25% of the capital value of your LGPS benefits, or

• 25% of the lifetime allowance which, for those with fixed protection, is £450,000 (i.e. 25% of your

lifetime allowance of £1.8 million) less the value of any other pension rights you have in payment.

You will lose fixed protection if you start a new pension arrangement, other than to accept a transfer of

existing pension rights, or if your benefits increase by more than the cost of living increases, or if you pay

contributions into a money purchase pension arrangement other than to a life assurance policy providing

death benefits that started before 6 April 2006. You will also be subject to restrictions on where and how you

can transfer benefits.

To have fixed protection you must have applied to HM Revenue & Customs (HMRC) in their prescribed form on

or before 5 April 2012.

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Fixed Protection 2014

The lifetime allowance reduced to £1.25 million in 2014/15 and a new protection called fixed protection 2014

was introduced. If you expect your pension savings to be more than £1.25 million (including taking into

account past benefits already in payment) when you come to take them on or after 6 April 2014 you can use

fixed protection 2014 to help reduce or mitigate the lifetime allowance charge. You can't have fixed protection

2014 if you already have primary, enhanced or fixed protection. With fixed protection 2014 your lifetime

allowance is fixed at £1.5 million rather than the new standard lifetime allowance of £1.25 million.

The maximum tax free lump sum you can take on retirement is the lesser of:

• 25% of the capital value of your LGPS benefits, or

• 25% of the lifetime allowance which, for those with fixed protection, is £375,000 (i.e. 25% of your

lifetime allowance of £1.5 million) less the value of any other pension rights you have in payment.

You will lose fixed protection 2014 if you start a new pension arrangement, other than to accept a transfer of

existing pension rights, or if your benefits increase by more than the cost of living increases, or if you pay

contributions into a money purchase pension arrangement other than to a life assurance policy providing

death benefits that started before 6 April 2006. You will also be subject to restrictions on where and how you

can transfer benefits.

If you lose fixed protection 2014 you must notify HMRC within 90 days. Failure to do so could result in a fine of

£300 and a penalty of up to £60 per day after the initial fine has been issued until you supply them with the

required notification.

To have fixed protection 2014 you must have applied to HM Revenue & Customs (HMRC) in their prescribed

form on or before 5 April 2014.

Individual protection 2014

As well as fixed protection 2014, the government has announced that individual protection 2014 will be

available when the lifetime allowance is reduced to £1.25 million for 2014/15. Individual protection 2014 will

apply from 6 April 2014 for those with pension savings valued at over £1.25 million on 5 April 2014.

Individual protection 2014 will give a protected lifetime allowance equal to the value of your pension rights on

5 April 2014 - up to an overall maximum of £1.5 million. You will not lose individual protection 2014 by making

further savings in to your pension scheme but any pension savings in excess of your protected lifetime

allowance will be subject to a lifetime allowance charge.

Your application for individual protection 2014 must be received by HMRC no later than 5 April 2017.

43

You can hold both fixed protection 2014 and individual protection 2014 but you can't apply for them at the

same time. You can also hold individual protection while holding either enhanced protection or fixed

protection but you can't apply for individual protection if you already hold primary protection.

For more information on individual protection 2014 see:

https://www.gov.uk/government/publications/pensions-individual-protection-2014.

Lifetime Allowance

The lifetime allowance is the total capital value of all pension benefits you can have without triggering an

excess benefits tax charge. If the value of your pension benefits when you draw them (not including any state

retirement pension, state pension credit or any spouse’s, civil partner’s or dependant’s pension you may be

entitled to) is more than the lifetime allowance, or more than any protections you may have, including

primary lifetime allowance protection, enhanced protection, fixed protection, fixed protection 2014 and

individual protection 2014. The lifetime allowance for 2011/2012 was £1.8million and reduced to £1.5 million

for 2012/13. It remained at £1.5 million for 2013/14 and from 2014/15 has been reduced to £1.25 million.

For pensions that start to be drawn on or after 6 April 2006, the capital value of those pension benefits is

calculated by multiplying your pension by 20 and adding any lump sum you draw from the pension scheme.

For pensions already in payment before 6 April 2006, the capital value of these is calculated by multiplying the

current annual rate, including any pensions increase, by 25. Any lump sum already paid is ignored in the

valuation.

When any LGPS benefit, or any other pension arrangement you may have, is brought into payment you use up

some of your lifetime allowance – so even if your pensions are small and will not exceed the lifetime

allowance you should keep a record of any pensions you receive. If you have a pension in payment before 6

April 2006, this will be treated as having used up part of your lifetime allowance.

When you draw your LGPS pension your administering authority will let you know the value of your LGPS

benefits and ask you about any other pensions you may have in payment, so they can work out whether or not

to deduct a recovery tax charge. If you do not provide this information promptly it could delay the payment of

your pension.

If your LGPS benefits are more than your lifetime allowance you will have to pay tax on the excess. If excess

benefits are paid as a pension the charge will be 25%, with income tax deducted on the ongoing pension

payments; if the excess benefits are taken as a lump sum the excess will be taxed once only at 55%.

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Lower Earnings Limit

This is the amount of pay that you can receive before you pay any National Insurance contributions. The Lower

Earnings Limit for 2015/2016 is £112 per week. It is usually increased annually by Parliament.

Pay

In England, this is your basic allowance or special responsibility allowance, or both, which is specified as being

pensionable in your council’s scheme of allowances. In Wales it is your basic and special responsibility

allowance. It does not include any dependants’ carers allowance, travelling and subsistence allowance, or co-

optees allowance.

Policy Statement

This is a statement that your council and your administering authority must publish, setting out how they have

chosen to exercise certain discretions under the LGPS. Other discretions may also be included. You may ask

your council and your administering authority for the latest copy of their Policy Statements.

Primary lifetime allowance protection

Primary protection is aimed at protecting benefits earned up to 5 April 2006 for those high earners affected by

the introduction of the lifetime allowance from 6 April 2006 i.e. those whose benefits at 5 April 2006 already

had a capital value in excess of the 2006/2007 lifetime allowance of £1.5 million.

If the value of your pension benefits at 5 April 2006 was more than the 2006/2007 lifetime allowance of

£1.5million and you have registered for primary protection, you have an individual lifetime allowance based on

how much your benefits at 5 April 2006 exceeded the value of the 2006/2007 standard lifetime allowance.

Your individual lifetime allowance increases at the same rate as the standard lifetime allowance. So, if your

benefits at 5 April 2006 exceeded the 2006/2007 standard lifetime allowance by 10%, your individual lifetime

allowance will always be 10% higher than whatever the standard lifetime allowance is in future years.

If your pension rights are shared on divorce or dissolution of a civil partnership this will result in the individual

lifetime allowance being reduced (or lost if it reduces to below the standard lifetime allowance).

To have primary protection you must have registered for it with HM Revenue and Customs by 5 April 2009.

Protected member

If you were contributing to the Scheme on 30 September 2006 you may have protected rights regarding early

payment of your benefits.

45

• If you will be age 60 or over by 31 March 2016 and choose to retire before age 65 (with employer’s

consent if retiring before age 60) you may have some protection from the reductions applied to benefits

voluntarily drawn before age 65, as explained below: -

o If you satisfy the 85-year rule when you start to draw your pension, the benefits you have

accrued up to 31 March 2016 will not be reduced. However, the benefits built up after 31

March 2016 will be reduced by the factor shown in the table on page 17 which relates to the

number of years the benefits are being paid earlier than age 65.

o If you do not satisfy the 85 year rule when you start to draw your pension, but would have

satisfied the rule if you had remained in employment until age 65, the calculation of your

benefits is split into two parts. Firstly, all the benefits you have built up in the Scheme up to

31 March 2016 will be reduced by the factor shown in the table on page 17 which relates to

the number of years the benefits are being paid earlier than the date you would have met

the 85 year rule. Secondly, any benefits you have built up in the Scheme after 31 March 2016

will be reduced by the appropriate factor shown in the table on page 17 which relates to the


o If you do not satisfy the 85-year rule when you start to draw your pension, and would not

have satisfied the rule if you had remained in employment until age 65, all the benefits you

have built up in the Scheme will be reduced by the appropriate factor shown in the table on

page 17 which relates to the number of years the benefits are being paid earlier than age 65.

• If you will be under age 60 by 31 March 2016 and will not be 60 by 31 March 2020 and choose to retire

before age 65 (with employer’s consent if retiring before age 60) you may have some protection from the

reductions applied to benefits voluntarily drawn before age 65, as explained below:



March 2008 will be reduced by the factor shown in the table on page 17 which relates to the




benefits is split into two parts. Firstly, all the benefits you have built up in the Scheme up to

31 March 2008 will be reduced by the factor shown in the table on page 17 which relates to

the number of years the benefits are being paid earlier than the date you would have met

the 85 year rule. Secondly, any benefits you have built up in the Scheme after 31 March 2008

will be reduced by the appropriate factor shown in the table on page 17 which relates to the


46





• If you will be aged 60 between 1 April 2016 and 31 March 2020 and choose to retire before age 65 (with

employer’s consent if retiring before age 60) you may have some protection from the reductions applied

to benefits voluntarily drawn before age 65, as explained below:



March 2008 will, if you do not meet the 85 year rule by 31 March 2020, be reduced by the

factor shown in the table on page 17 which relates to the number of years the benefits are

being paid earlier than age 65. If you do meet the 85 year rule by 31 March 2020 a smaller

reduction factor than that shown on page 17 will be applied to the benefits built up between

1 April 2008 and 31 March 2020.



benefits is split into two parts. Firstly, all the benefits you have built up in the

Scheme up to 31 March 2008 will be reduced by the factor shown in the table on page 17

which relates to the number of years the benefits are being paid earlier than the date you

would have met the 85 year rule. Secondly, any benefits you have built up in the

Scheme after 31 March 2008 will, if you would not meet the 85 year rule by 31 March 2020,

be reduced by the appropriate factor shown in the table on page 17 which relates to the

number of years the benefits are being paid earlier than age 65. If you would meet the 85

year rule by 31 March 2020 a smaller reduction factor than that shown on page 17 will be

applied to the benefits built up between 1 April 2008 and 31 March 2020.





How do I know if I will satisfy the 85-year rule?

The rule is satisfied if your membership (as defined below) and age (each in whole years) adds up to

85.

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Membership that counts in working out the 85 year rule

The number of years that you have been a LGPS member as a councillor or elected mayor plus, for

deferred benefits, the period between the date of leaving and the date benefits are to be bought into

payment, but excluding any membership in respect of which you are already in receipt of a Local

Government pension, or in respect of which you hold an earlier Local Government deferred pension

which relates to an earlier period of membership of the Scheme as a councillor or elected mayor, or in

respect of any other earlier period of membership of the Scheme as a councillor or elected mayor

which has not been aggregated with your current period of membership.

State pension age

This is the earliest age you can receive the state basic pension. State pension age is currently age 65 for men.

State pension age for women is currently being increased to be equalised with that for men and will reach 65

by November 2018.

State pension age equalisation timetable for women


Before 6 April 1950 60




6 April 1953 - 5 August 1953 In the range 63 - 64

6 August 1953 - 5 December 1953 In the range 64 - 65

The State pension age will then increase to 66 for both men and women from December 2018 to October

2020.

Increase in State pension age from 65 to 66 for men and women


6 December 1953 - 5 October 1954 In the range 65 - 66

After 5 October 1954 66

Under current legislation the State pension age is due to rise to 67 between 2026 and 2028 and to

68 between 2044 and 2046. However, the government has announced plans to link rises in the

State Pension Age above age 67 to increases in life expectancy. To find out your State Pension Age

please visit https://www.gov.uk/calculate-state-pension.

Term of Office

A term of office ends on the fourth day after the ordinary day of election of councillors. New terms of office

commence on the same day as the old terms end.

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Total membership

This is the amount of membership that counts, as detailed below, for:

• working out whether you are entitled to a benefit

~ the number of years and days that you have been a LGPS member as a councillor or elected mayor.

• working out the amount of your personal benefits

~ the number of years and days that you have been a LGPS member as a councillor or elected mayor

but excluding any membership in respect of which you are already in receipt of a Local Government

pension, or in respect of which you hold a Local Government deferred pension which relates to an

earlier period of membership of the Scheme as a councillor or elected mayor, or in respect of any

other earlier period of membership of the Scheme as a councillor or elected mayor which has not

been aggregated with your current period of membership.

~ any membership granted by way of ill health enhancement (see page 15).

Upper Accruals Point

This is the amount of pay beyond which you cease to pay the, lower, contracted-out rate of National Insurance

contributions. The Upper Accruals Point for 2015/2016 is £770 per week. On earnings above the Upper

Accruals Point and up to the Upper Earnings Limit of £815 per week you pay the full 12% National Insurance

contribution and on earnings above the Upper Earnings Limit you pay a 2% National Insurance contribution.

* * *

The Local Government Pension Scheme...stakeholder pension scheme from your earnings as a councillor. There are HM Revenue and Customs controls There are HM Revenue and Customs controls

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